Purchasing Fraud And Theft By Employees

I turned the corner in my white sedan.   It was a sturdy car with bouncy springs and had once been a police vehicle.  How appropriate, “Because the scene at this old shed looks bad, real bad!” 

This large closed-in shed had started off as an ill-kept open shed in the middle of a field outside a small West Texas town of about 230,000 people.   The area was high plains with few trees compared to the place of my youth.  Cotton fields spanned north, south, east, west and every combination of compass designation possible.  Most of the cotton was picked and the fields were dusty.  Wind would pick up the dust and tumbleweeds and blow them across the plains just like in the old western movies.   

Homes and a youth center were within a short walking distance from the shed.  Sometimes, there was a man out there, cleaning up around it.  Sides were put on it.  The place got locked up.  Kids couldn’t get in there and play around, possibly get hurt.  I was glad to see the shed covered and tidied up.    There was little activity after the sides went up.   

That day though, it seemed the world converged on that shed.  Specifically, the law enforcement world... unmarked cars, cars marked with local and state law enforcement insignia, military security vehicles, blue suits, brown suits, military suits, black federal authority looking suits… and there was me driving by in my old white police car.  One side of the shed was down.  Inside the barn were cars, a conversion van, and a boat.  That was only what I could see.  

I asked some friends what was going on.  All replied with some version of, “I don’t know, but it ain’t good!”  There was this one person who worked in the military contracting office; he was very tight lipped.

The next day, I found out that a federal contracting officer had been charged with pulling one of the oldest tricks in the book.  It’s probably been around since the first chief or monarch asked an administrator to buy something.  The contracting officer was alleged to have created a business then awarded contracts to his business.  Reportedly, when his lifestyle did not match his federal job, it drew suspicion.

In this case, the contracting officer’s scheme was somewhat sophisticated.  Again, reportedly, it was only the lifestyle that gave him away.  Recent cases in the press and others that often don’t make the press aren't sophisticated at all.  They seem... well, you tell me a  good word for it?
1.       Equipment comes in and goes out of businesses with no accountability simply because it doesn’t meet a minimum dollar value.

2.      Services are bought and never received.

3.      Credit cards orders are on paper only and are neither monitored nor audited properly.

4.      Good repair parts end up on online auctions.. 

I am not talking about the one or two items.  I do see reports of those who have been charged with crimes involving less than five thousand dollars.  So, someone is probably watching the gate in some of those instances.  However, I read cases where fraud had been going on for years and involved hundreds of thousands of dollars that are traced back to an employee.   The property value of the assets in that old shed was one hundred thousand dollar US, minimally.  SBA.gov reports that employee theft costs as much as five percent of annual revenue (written in 2010).   Employee theft and fraud are billion dollar problems in the United States.   

Yes, honest employees are important.  One needs policy and checks and balances that are performed, too.  Reconciling a cash drawer is a check and balance process.  Wouldn’t you reconcile your cash drawer regardless of the cashier?  That’s just good practice that one does day in day out, period.  So, what’s the issue? Are managers so overwhelmed that simple checks and balances are not seen as important because they are simple?  Is it negligence?  What do you think?  What's the solution?